"How We Saved $10,000 in Just One Year"

How one woman and her reluctant family slashed their spending — and shrunk their credit card debt

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The conversation took place while we were drivingto the mountains for a short ski trip over the kids' February break two years ago. A part of me knew it was coming — knew it, and dreaded it. For the holidays, my husband, Gordon, and I had surprised our 14-year-old with a fancy (read: expensive) mountain bike and our 12-year old with a long-coveted video game system — plus the usual hoodies, books, iTunes gift cards, and stocking stuffers. We were both struggling with our annual post-indulgence hangover, only this time the feeling was more acute. Although Gordon and I, both self-employed, still had work, it was a leaner-than-normal year, and we were living paycheck to irregular paycheck. We had four years to save for college, 20 or so years to add to our meager retirement accounts. So I wasn't surprised when Gordon glanced at me glumly and said, "We have to stop spending so much money."

Our money conversations usually fall somewhere on the spectrum between awkward and acrimonious, which is why we discuss finances about as often as we hash over his prostate health. But that day I knew Gordon's comment wasn't an accusation; it was an attempt to reach an amicable accord. "Yeah, you're right; we've been a little out of control lately," I agreed.

Over the previous five years or so, I had racked up a lot of debt—five figures' worth—a somewhat stunning amount that had advanced stealthily, like dry rot, while I was distracted with other things: deadlines, the kids' homework and sports, keeping up with the laundry. I still have no idea where I spent it all. Daily chai lattes at Starbucks? Plane tickets for our annual summer vacation? Clothes? Gifts? Groceries? It's impossible to identify one culprit. I simply frittered it away, as my mom would say. And I suspected Gordon was similarly saddled with debt.

I wasn't sure, because we'd always kept our money completely separate, on the theory that our erratic incomes and inherent disorganization would doom any attempt at joint banking. Besides, I'd never wanted him scrutinizing my spending habits any more than he wanted me poking around in his. We'd each taken charge of certain bills — he paid the big stuff, like the mortgage and property taxes, while I handled most of the other monthly expenses, including the majority of the groceries — and we bailed each other out if one of us ran short on cash.

Our arrangement had helped us avoid big money battles, but with no spousal oversight, we'd both been guilty of spending too much and saving too little. "Maybe we should each make a budget," I said tentatively, a part of me secretly hoping he'd say no.

He looked at me with surprise, like I'd just suggested we pull off to the side of the road for a quickie. "Really? You'd do that?"

"Sure; I guess," I said.

He already looked more cheerful. "Let's do it when we get home."

Even then, our determination might have faded — we'd made big promises before about sitting down and hammering out a budget — had it not been for a curious bit of serendipity. When we got home from our trip, there was a copy of a book in our mailbox, sent by my editor at Good Housekeeping. Called Wealth Watchers: A Simple Program to Help You Spend Less and Save More, it applies the principles of Weight Watchers to finances. The premise is simple: Set a daily spending goal, just like you'd set a daily calorie goal, by determining how much cash you actually have available to spend every day; track your daily spending; and watch the debt (like the pounds) melt away and the savings pile up. Alice Wood, the book's author, says she and her husband spent $12,000 less the first year they followed the program than they had the year before. I couldn't imagine cutting even a tenth of that, but I was willing to try.

Still, we dragged our feet before starting, blaming the usual culprits: work, stress, our over-packed schedules. Finally, at the end of April, we resolved to put ourselves on a financial diet. We broke the news to the boys over dinner one night.

Will, the older and more emotionally savvy of the two, said it sounded like a good idea, while Griffin moaned, "Awwwwww, nooooo! Why? We won't ever be able to do anything!" We assured him that we intended to trim the budget, not machete it — that we just wanted the whole family to become more aware of the difference between wants and needs. Will rolled his eyes, recognizing this new material as part of our ongoing series of Responsible-Behavior Speeches, but Griff brightened. "OK," he said. "I need to go see Iron Man 2 this weekend." Clearly, this wasn't going to be easy.

I called Wood to see what she advised to help us stay the course. She suggested we ask another family to try the program, too — the theory being that behavior change is easier if you have other people offering support and encouragement. There's the Weight Watchers influence again. We enlisted the help of our friends Susan and Charlie, who'd lost their longtime, lucrative jobs — she was in commercial real estate, he was a menswear designer — within two weeks of each other 10 months before and had only piecemeal work since then. Because they didn't have any debt aside from their mortgage and had wisely set aside a solid year's worth of living expenses, they'd been able to stay afloat without making drastic changes like raiding their retirement accounts or selling their home. They'd already cut out most discretionary spending — yard maintenance, expensive haircuts, clothes shopping, gifts. But with no real job prospects on the horizon and two kids around the same ages as ours, we knew they were motivated to pinch pennies — and would be inspiring role models for Gordon and me. Still, I wondered: After 17 years of haphazard spending, could we really trim our budget and get our finances under control?

The first step in the program sounds simple: Fill out a monthly budget worksheet. All I have to do is subtract my fixed and semi-fixed monthly expenses — things like the family phone bill, health and car insurance, gas and electric, and debt financing — from my monthly net income (after taxes) to determine the amount I can spend every month without going into more debt, then divide that number by 30 (the average number of days per month) to arrive at my daily spending allowance.

"If you want to stay on top of your spending, that's the magic number," says Wood. "Otherwise you're operating in the dark." Finally, at age 47, I'm heading toward the light of fiscal responsibility. Hallelujah!

Feeling virtuous, I begin the worksheet — and am stymied on line one: monthly net income. Since I'm a freelance writer, my income can vary from as much as $6,000 a month to as little as $1,600. Without a fixed number to work with, how am I supposed to start? Feeling a little embarrassed — can I really be stuck already — I call Wood, who before starting Wealth Watchers was an estate-planning attorney. "There are lots of people in your position," she says. "Make a conservative estimate of your monthly income. Think negatively. People always believe they're going to make more and spend less than they do. That sort of optimism can be ruinous."

Embracing my inner pessimist, I jot down a low-ish monthly income, then subtract my fixed monthly expenses. By the time I reach the bottom line, I'm a little nauseated: I have $90.73 to spend per day. But I often spend $200 or more in a single trip to the grocery store! When I mention this to Wood, she says it's fine to blow past your per diem one day, so long as you make up for it by spending less over the next few days.

It turns out my daily allotment is just $5 more than that of Charlie and Susan, who've been unemployed for a year — and it's all because I need to put so much toward my credit card debt. I have four cards with balances; Wood says you should never have more than two cards and they should be paid off monthly. I use all but one card infrequently, and always make more than the minimum monthly payments, but even so it will take nearly five years of abstemious scrimping to pay them all off. I'm starting to understand the consequences of that mini Everest of debt — and the necessity of digging out. Ugh.

I should count my blessings, though. Plenty of people who do Wood's calculations find that their fixed expenses exceed their income, a situation that makes the next step in the Wealth Watchers program — finding ways to minimize your fixed and semi-fixed expenses — not just helpful, but critical. Wood says she saved $7,000 a year just by finding lower-cost car, health, and life insurance. I feel sure we wouldn't save more than a few hundred dollars a year by switching carriers, because we tend to go bare bones from the outset (we've never shelled out for HBO on our cable plan, for instance) — and I don't have the time or temperament to make all those calls — so I skip this step.

But Susan does it and manages to save a little by reducing insurance coverage on both her car and her house. "It's not a game changer," she says, "but in our situation, every little bit helps." When Gordon returns, exhausted, from a three-day business trip, I ask him how his Wealth Watchers calculations are going. He mumbles something about "work" and "way behind"—not a good sign—but he's so wiped out, I decide to leave him alone.

The Wealth Watchers plan requires you to write down every single thing you spend every single day. Will wants $5 for lunch? I dig through my purse, find the notebook included with the book, and write it down. I've spent $9.74 for a new razor, or $3.26 for a latte? Down it goes in the notebook. It's a massive pain in the butt, because it's yet another chore in my already demand-filled day, but Susan, who can always be counted on to see the bright side, points out the big plus.

"It forces you to have a 'think-before-you spend moment,'" she says, quoting Wood. "When I realize I'm going to be held accountable for what I buy, it's easier for me to say no to things I don't need." I see what she means, and yet already I've succumbed to the siren song of unnecessary stuff. I know enough to stay away from Nordstrom and Anthropologie when I'm trying to save money, but one afternoon I stroll into my favorite consignment store — used equals cheap, right? — where I find racks of trendy summer shirts. I already own enough shirts to clothe a small village, but I pull a few out and try them on anyway. They all fit perfectly. Together they come to $72, not much below my daily spending allowance. With regret, I start to put them back. Then the saleswoman says, "Did I mention that today only, all shirts are 15 percent off?" My credit card is out of my wallet and on the counter before I can think, What would Wealth Watchers say? The total, including our 9 percent sales tax, is $66.70. "What a great deal!" the saleswoman chirps.

But when I log the purchase in my notebook, I can hear my own lecturing-the-kids voice ask, Now, Ginny, tell me: Was that a want or a need?

What I need — far more than another top — is help getting my several-hundred-dollars-a-month clothing habit under control, so I call Sally Palaian, Ph.D., a psychologist and money coach in Detroit. When I describe my dizzyingly fast splurge, she says, "There are certain words, like 'sale,' that can trigger spending. You need to build in a buffer period — time to think about every purchase before you buy it. Next time you want something, wait a day, or call a friend and run it by her. Another thing that's helpful is to tape a note to your credit card that says, 'Do I really need this?'" The note strategy works well, I find, when it comes to sweet treats. When I ask myself, Do you really need a coffee drink or a cupcake — expensive and caloric? the answer is always no. But clothing is harder for me to resist. Susan, who's put herself on a strict no-shopping regimen, has been having old clothes altered so they seem new and is particularly happy with an old below-the-knee-length skirt that's now more of a mini. "But I miss getting new things," she admits.

Wood suggests I try to treat my closet more like a store. "When you want to buy something, go home and look through your closet first to see what you already have that's similar," she says. "It's amazing how often the thing you want is almost the same as something you already have."

I think guiltily of the 40 pairs of jeans that are spilling out of my closet and realize she has a point. Clearly I need all the help I can get, so I also decide to try a wacky strategy I heard a friend mention not long ago: I put my credit cards in the freezer — a symbolic move that will, hopefully, put a chill on my shopping.

At more than $1,000 a month, food is the single biggest discretionary expense in my budget. We eat out just once or twice a week. The bigger problem is the grocery store, where I shop aisle by aisle, loading up the cart with random items — a sure way to overspend, according to Wood — rather than using Susan's strategy: creating a list for her weekly Sunday shopping trip and buying only the things she knows she absolutely needs.

I try to become a list-maker. After just two attempts I realize why it doesn't work for me: a) our tastes and schedules are unpredictable, so the chicken I buy for Tuesday sits till Friday, when I end up throwing it out; b) I forget to put things on the list, so I'm forever running back to the store for, say, eggs or apples; c) I hate shopping with a list — it's too regimented, too restrictive, too un-fun. I like to let whim and taste guide me.

The question is, can they guide me to less expensive items? Turns out, they can — sort of. I buy less meat and more fresh veggies. Instead of chips, I pick up supercheap plain pop-corn and spruce it up with a little salt, Parmesan cheese, and butter for the boys' lunches. Surprisingly, they don't complain. In place of the mango, papaya, and pomegranate juice the boys glug down by the jugful, I buy frozen OJ and powdered lemonade: not as healthy, but a significant savings. Will says he doesn't like orange juice, but when I explain that it's less expensive, he drinks it or opts for tap water — free, and healthful. The boys are grudgingly getting with the program in other ways, too. They agree to take sandwiches from home rather than buy their lunch at school every day, and when they hear the price of a surf camp they wanted to go to in the coming summer, Griff says, "That's stupid. We don't have to go."

An obvious way to cut our expenses would be to buy conventionally grown food instead of organic, but I'm torn — actually, more like tortured. For years I've shelled out for organic because I believe it's healthier and better for the environment — and in northern California, where I live, it's considered practically negligent not to buy organic. But the price! I dither for a full five minutes in front of the milk: Should I continue forking over $6.99 for a gallon of organic or save $3 by switching to regular?

For help, I employ an eye-opening calculation Wood calls The Power of 365. "Multiply any potential savings — even $1 — by 365 days a year, and you'll get a graphic sense of its value," she says. "A $4 latte every day costs $1,460. That's a pricey habit."

Since I only buy milk twice a week, I use a modified version: The Power of 104. The upshot: I spend $312 more every year so we can drink milk from hormone-free cows. Is it worth it?

After much agonized mulling, I fall back on my own mathematical equation: Guilt Calculus. The guilt I feel over spending the extra money is less than the guilt I would feel over watching my kids chug down glass after glass of potentially chemical-laden milk every day. I buy the organic.

In the produce department, I'm paralyzed again by the organic-versus-conventional impasse. Instead of pears and plums, I see difficult choices. Brain sputtering from decision deadlock, I leave with just one bag of organic grapes ($3.99 a pound, versus $2.49 for conventional). When I mention my produce-aisle panic to Susan, healthy eater extraordinaire, she admits, "I don't buy everything organic anymore. I use the Environmental Working Group's guide to pesticides on produce to decide when I can get away with conventional." It lists 53 fruits and vegetables from most to least contaminated (ewg.org/foodnews/list). I print it out and stick it in my purse to use as a shopping guide. Phew....

We have a small party for the boys' birthdays, which fall in the same week — surfing (free) followed by dinner at a burger joint ($113, with tip, for eight people). We give them each one thing they really need — Griff gets a bicycle helmet, Will gets biking shorts — and tell them we'll pay for the two bikes they're building out of spare parts at the local cycling co-op, which should cost less than $50 each.

They don't whine. They don't look disappointed. Indeed, they seem thrilled — so thrilled that Griff suggests they head to the bike co-op right away, even though it's 8 P.M. on a school night. After the party, I finally broach the money subject with Gordon. I've suspected for a while that he isn't exactly adhering to the program. Turns out, he's blown it off entirely. I'm ticked. What happened to Mr. Gung Ho "Let's Get Our Spending Under Control"?

"It was too hard to write everything down," he admits. "I only got as far as the calculations to find my daily spending money. I try to keep that figure in mind when I spend money during the day, but really my biggest expense is lunches. You know me; I don't shop."

It's true. When he wanted a new mountain bike a few years ago, he saved for 19 months. I become less angry when I realize he actually has himself on a tighter budgetary leash than I do. He allows himself just $700 of discretionary spending money per month so that he can pay down our line of credit, put money toward our income taxes (a hefty sum, since we're both self-employed), and add a little to our retirement accounts — an expense he usually covers for both of us. Because he has little to spare after those big outlays, he exceeds his budget largely due to unexpected big-ticket items — the fridge that dies the day we return from vacation; the TV that flames out in the middle of the Winter Olympics, when our viewing is at an all-time high. What can you do about that?

Plenty, according to Stuart Vyse, Ph.D., a professor of psychology at Connecticut College and author of Going Broke: Why Americans Can't Hold On to Their Money. "In our minds, things like cars breaking down are unexpected, but of course they're really not. Things break all the time. If you want to stay out of debt, you need to plan for the unexpected — and have money set aside to pay for it," says Vyse.

Wood has a simple solution: Use your savings account as your emergency fund, and put a little money into it every month. "Even if it's just $25, it adds up over time," she says. Two days later, I have the opportunity to learn — in painful, graphic detail — why it's important to have a cushion to cover the unexpected. When I sit down at my computer, I get an error message saying the hard drive is unavailable. I reboot; I unplug; I pound on the keys. Nothing. The repair-shop techie shakes his head: "I can't access it at all. I hope you backed up your data." The computer is just 18 months old! Why would I back up my data? He refers me to a local company — the Special Ops of data retrieval. "If anyone can get your files, they can," he says.

Three days after I drop off my hard drive, they call me. They can retrieve everything — for $2,197.67. I think about it for a day, crying intermittently the whole time. Even if I didn't spend a dime for the rest of the month, I couldn't afford it out of pocket.

Gordon, still feeling contrite for his lack of participation in the program, offers to pay for it, but he doesn't have the cash, either. I pull a frosty credit card from the freezer — the one with the taped-on note that says, "Do I really need this?" Unfortunately, the answer is yes.

WEEK THREE REALITY CHECK

$2,357.67 over budget. In addition to my computer catastrophe, Griff started seeing an $80-per-hour tutor once a week — and I failed to adjust my spending to take it into account.

I become monkishly frugal. I make dinners from the pasta, soup, and frozen pizza we already have on hand, go for a hike with my friend Rene instead of meeting her for dinner, and cozy up with Gordon and the boys on the couch to watch a flick from On Demand instead of going to the theater. We actually spend more time together as a family than we have all month. It's wonderful. "We all think new things are going to make us happy, but there's ample evidence that what really moves the needle on happiness is social connections — spending time with family and friends," says Ron Wilcox, Ph.D., professor of business administration at the University of Virginia Darden School and author of Whatever Happened to Thrift? Why Americans Don't Save and What to Do About It. "It can help to keep that in mind when you're struggling with money."

The boys, still wary from my day-long computer-related crying jag, don't hit me up for cash all week long — a very unusual occurrence. When some friends ask them to meet for a milkshake after school, they pour out their jar of change and start counting their quarters and dimes. The old me would've swooped in and pressed a $10 bill into their hands; the new me decides to see if they can swing it themselves. And they do — but it reminds me that if I don't want my sons to nickel-and-dime me forever, I need to figure out a way for them to start earning their own money.

Wood is anti-allowance, on the theory that kids need to learn to connect money with work — a notion that makes a lot of sense to me — so Gordon and I decide to give the boys each $5 for every load of laundry that they wash, fold, and put away and another $5 for each time they mow the lawn. They think the idea "sucks big-time" — but why wouldn't they? They've gotten used to being handed $20 every time they ask.

"Our new approach to money is going to take some getting used to," I tell the boys. "But it's important for you to learn to be financially responsible." And it's then that it hits me: As painful and, in ways, disappointing as this month has been, there's really no turning back.

WEEK FOUR REALITY CHECK

$214.74 under budget. Which still leaves me $2,142.93 in the hole for the month.

Susan and Charlie, our friends and partners in downsizing, didn't do any better in terms of meeting their money goals. "We spent about $155 per day on average [versus their budget of just under $86 per day], so we wound up spending more than $2,000 over what we should have for the month," Susan says.

"The daily journaling process was a useful barometer for seeing in real time where exactly our money went. But even so, we still weren't able to rein in our spending enough to stay within the budget we had established," she explains.

But now that I've been tracking how much money I have and where every cent of it goes over the past few weeks, my attitude toward spending has changed. On the spectrum from fashionista to frugalista, I've taken a giant step toward the middle — and I like the way it feels, even if I happen to be wearing last year's boots.

It's been more than a year since our foray into the world of financial responsibility, and some lessons have stuck. I've increased the amount I put into savings every month from $25 to $100, and I haven't had to tap into it for emergencies, so it's gradually building up. And just knowing I have about $90 of discretionary money to spend every day has made me way more aware of the price of everything I buy. That said, I no longer write down everything I spend, and I've made some blunders, particularly this past December, when I reverted to a one-for-you, one-for-me style of Christmas shopping and wound up blowing way past my budget.

Still, I've managed to pay down nearly $10,000 of my credit card debt. The big surprise, though, is Gordon, who seemed so unmotivated at first. He has paid off a hefty chunk of our line of credit and is almost free of credit card debt. "Even though I didn't adhere strictly to the program, we've started talking so much more about spending that it made me think more about where my money is going," he says. "Besides, it felt like a competition, and you know me: I like to win." And as for Susan and Charlie, she's working at an hourly rate at a compensation-consulting firm; he just got a full-time job as a designer for a bicycle-apparel company. Though they are thrilled to be on their way to recovery, they wound up spending nearly $25,000 of their savings last year since they earned just 30% of their previous usual income.

"I still try to stay close to my Wealth Watchers daily spending amount, but the truth is, without our savings we'd be sunk," Susan says — which gives me all the more motivation to keep being the biggest saver I can possibly be.

• Something will always go wrong (medical expenses, car trouble) — especially if you're not ready for it to happen. Talk to a banker about automatically transferring a certain amount of money each month into a savings account that you can use as a safety net.